Managing Global Supply Chain: Technique # 1.

A firm is required to store the goods so as to bridge the time gap between the production and meeting the customer demand.

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The major functions of warehousing are:

Storage of goods:

The basic function of warehouses is to store inventories in safe and orderly conditions till the time of export shipment. Besides, the storage facilities at overseas locations facilitate holding inventories that are released as and when demanded by the market.

Consolidation:

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Storage is used to consolidate cargo from various locations or shippers before it is loaded on board the vessel. Besides, warehouses are also used to consolidate the Less than Container Load (LCL) cargo for stuffing in the container before dispatching the container to the port of shipment or destination.

Breaking bulk:

In the overseas markets, the import cargo received either in container load or bulk is divided into several small parts in the warehouse before dispatching it to wholesalers or distributors.

Mixing or assembly:

A shipper may procure the goods from various suppliers and mix them before shipment. Similarly, an importer may import the goods from a number of exporters located in different countries and mix them before dispatching them to wholesalers and distributors.

Assembly is an equivalent term used for mixing in case of industrial or semi-manufactured goods in Completely Knocked Down (CKD) or Semi-Knocked Down (SKD) condition.

Various types of warehouses include commodity bulk storage, refrigerated, or general merchandise warehouse. In India, Central Warehousing Corporation (CWC) provides custom-bonded warehouses at ports and air cargo complexes.

A firm has an option to use its own warehouse or a leased private warehouse or may use a public warehouse depending upon its requirements and availability. Various factors affecting selection of warehouse include the inventory level to be maintained by the firm, location of the warehouse, the level of customer service provided, and the warehousing costs.

Managing Global Supply Chain: Technique # 2.

Inventory management:

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Maintaining inventories is an integral part of supply chain management.

The principal reasons for holding inventories are:

To maintain uninterrupted supply:

In order to meet the demand fluctuations in the markets, a firm has to maintain inventories so that its supply to market remains uninterrupted.

To optimize buying costs:

A firm has to hold certain level of inventory so as to optimize the administrative costs associated with procuring the goods. A widely used classical technique for inventory decisions is Economic Order Quantity (EOQ) for cost optimization.

To economize production costs:

Inventories facilitate continued production runs that help in keeping production costs lower due to optimum utilization of fixed costs.

To take advantage of quantity discounts:

Firms usually get quantity discounts for buying products in bulks.

To cope up with seasonal fluctuations:

Demand and supply patterns for most products in the markets are cyclical in nature. In order to maintain continued production and cope up with seasonal demand variations in the market, a firm is required to carry inventory.

Managing Global Supply Chain: Technique # 3.

Packing and unitization:

Packaging of export cargo is an important logistics activity as it facilitates safe and smooth shipment of goods. Besides, packaging facilitates unitization of export cargo that further facilitates cargo-handling during transit. Standardized practices for cargo unitization are used so as to increase its acceptability internationally.

Sling loads and pallets are widely accepted unitized cargo in air transport while containers with 20 or 40 ft. length, 8ft height, and 8ft width are widely used for ocean transport. A container is an article of transport equipment, strong enough for repeated use, to facilitate handling and carriage of goods by one or more modes of transport.

Containerization increases the size of unit load and facilitates handling and transportation of cargo.

Transporting the cargo by containers offers the following benefits to shippers:

i. Facilitates door-to-door delivery

ii. Reduces cost of packing as the container acts as a strong protective cover

iii. Reduces documentation work

iv. Lowers warehousing and inventory costs

v. Prevents pilferage and theft

vi. Reduces susceptibility to cargo damage

Managing Global Supply Chain: Technique # 4.

Transportation:

Transportation is an important part of international logistics.

Various modes of transport used are as follows:

Air transportation:

Transportation of goods by air accounts for only 1 per cent in terms of volume but about 20 to 30 per cent in terms of value of the total world trade. Thus, it is the most preferred mode of transport for high-value goods. Besides, due to the increase in market competition and increasing availability of air cargo services, air transportation is rapidly gaining popularity in international trade.

iii. Competitive for small distances compared to air freight in respect of transit time and freight

iv. Economy on packaging cost compared to conventional ocean shipping

v. Lower risk of cargo damage during transit

A firm has the option to use its own private carriers, contract carriers (with formal agreement to transport, such as oil or milk tankers), or public carriers (that can be used by anyone). Road transportation is common for cross-country trade in land­locked nations and countries with strong economic groupings, such as European Union, NAFTA, etc.

In India, the major Land Customs Stations notified for cross-border trade include Attari in Punjab at the Indo-Pak border, Petrapole in West Bengal, Dwaki in Meghalaya at the Indo-Bangladesh border, and Moreh in Manipur at the Indo- Myanmar border.

Rail transportation:

India has the distinction of having a highly developed rail transport system in the world, but it can be used to transport goods to bordering countries only.

The major benefits of using rail for cargo transport are:

i. Economic vis-a-vis road transport

ii. Bulk cargoes can be handled in higher volumes

The major limitations in transporting the cargo by rail include limited availability of the railway network and the trade relations between India and its neighbouring countries. The major railway networks for international trade in India are Attari in Punjab at Indo-Pak border and Petra-pole in West Bengal that links Benapole in Bangladesh.

However, the transport of cargo through railway is widely used in European Union, NAFTA, i.e., Canada, the US, and Mexico and CIS countries that not only have good railway network but also much liberalized trade relations.

Ocean transportation:

Transportation of cargo by sea is the largest means of transportation in international trade. Operation of merchant ships is estimated to generate over US$500 billion in freight rates, representing about 5 per cent of the total global economy. The shipping industry presents healthy competition among over 10,000 individual shipping companies involved in international trade operating over 50,000 ships.

The deep sea trade is served by over 3000 ports and the cargo carried by the shipping industry consists of many millions of separate consignments, of different sizes, and with different physical characteristics. In view of high significance of ocean transport in international trade.

Managing Global Supply Chain: Technique # 5.

Information and communication technology:

Developments in information and communication technology (ICT) have revolu­tionized the entire concept of logistics management. It has evolved new areas of logistics management, such as Just-in-Time (JIT) management wherein the emphasis is on continued and reliable supply with much lower level of inventories holdings.

Firms have to develop an integrated logistics management system with meticulous conceptualization, planning, co-ordination, and implementation so as to create competitive advantage in the marketplace.